NEW YORK (Reuters) - U.S. stocks slipped on Monday, with the S&P 500 extending losses after its worst drop since mid-November in the prior session on continued worry legislators will be unable to reach a deal to avert the "fiscal cliff."

The benchmark S&P index declined 0.9 percent on Friday, its biggest percentage drop since November 14, as a Republican plan to avoid the cliff - $600 billion in tax hikes and spending cuts that could tip the U.S. economy into recession - failed to gain any traction on Thursday night.

But the index remains up more than 13 percent for the year, having recovered nearly all the losses suffered in the wake of the U.S. elections.

Some U.S. lawmakers expressed concern on Sunday the country would go over the cliff, as some Republicans charged that was President Barack Obama's goal. Talks are stalled with Obama and House of Representatives Speaker John Boehner out of Washington for the holidays.

"It does seem like we are continuing through the same drift of the same thing we've had the past couple of weeks - cliff talk," said Nick Scheumann, wealth partner at Hefty Wealth Partners in Auburn, Indiana.

"They will get together is the bigger thing and in the back of everyone's mind they believe that, it's just that you can't trade on what you don't know and we truly don't know what they are going to do."

Congress is expected to return to Washington next Thursday as Obama returns from a trip to Hawaii. As the deadline draws closer, a 'stop-gap' deal appears to be the most likely outcome of any talks.

Trading volumes are expected to be muted, with U.S. equity markets scheduled to close at 1 p.m. (1800 GMT) ahead of the Christmas holiday on Tuesday.

In addition, a number of European markets will operate on a shortened session, with other markets closed entirely.

U.S. retailers may not see a sales surge this weekend as ho-hum discounts and fears about imminent tax hikes and cuts in government spending give Americans fewer reasons to open their wallets in the last few days before Christmas.

Aegerion Pharmaceuticals Inc said the U.S. Food and Drug Administration approved Juxtapid capsules in patients with homozygous familial hypercholesterolemia, but will conduct a post-approval study to test long-term safety and efficacy. Shares were fell 3.4 percent to $24.85.

Herbalife Ltd dipped 0.7 percent to $27.05 in premarket after the company said it expects to exceed its previously announced repurchase authorization guidance and has retained Moelis & Company as its strategic advisor. The declines put the stock on track for a ninth straight decline.

Yum Brands Inc advanced 1.2 percent to $64.66 after Shanghai's food safety authority said the level of antibiotics and steroids in the company's KFC chicken was within official limits.